Correlation Between Daesung Eltec and Finebesteel

Can any of the company-specific risk be diversified away by investing in both Daesung Eltec and Finebesteel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Daesung Eltec and Finebesteel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daesung Eltec Co and Finebesteel, you can compare the effects of market volatilities on Daesung Eltec and Finebesteel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Daesung Eltec with a short position of Finebesteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daesung Eltec and Finebesteel.

Diversification Opportunities for Daesung Eltec and Finebesteel

-0.43

Correlation Coefficient

Daesung Eltec  Finebesteel

Very good diversification

The 3 months correlation between Daesung and Finebesteel is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Eltec Co and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Daesung Eltec is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Daesung Eltec Co are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Daesung Eltec i.e., Daesung Eltec and Finebesteel go up and down completely randomly.

Pair Corralation between Daesung Eltec and Finebesteel

Assuming the 90 days trading horizon Daesung Eltec is expected to generate 2.17 times less return on investment than Finebesteel. In addition to that, Daesung Eltec is 1.61 times more volatile than Finebesteel. It trades about 0.03 of its total potential returns per unit of risk. Finebesteel is currently generating about 0.11 per unit of volatility. If you would invest  85,900  in Finebesteel on October 23, 2024 and sell it today you would earn a total of  19,500  from holding Finebesteel or generate 22.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.69%
Values	Daily Returns

Daesung Eltec Co  vs.  Finebesteel

Daesung Eltec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Eltec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Eltec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Finebesteel

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daesung Eltec and Finebesteel

The main advantage of trading using opposite Daesung Eltec and Finebesteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daesung Eltec position performs unexpectedly, Finebesteel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Finebesteel will offset losses from the drop in Finebesteel's long position.

The idea behind Daesung Eltec Co and Finebesteel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.